What does the final of the Australian Master Chef and Trading have in common?
Last night they showed the final in the Australian Master Chef series on TV. This is a huge hit in Australia at the moment. It's a reality TV show where they are looking for the best chef in Australia.
In the final round of the competition last night, both contestants were given the task of making and preparing a chocolate tart.
They were both given all the ingredients and instructions on how to make the tart. During the competition, the one contestant looked at the steps required to make the chocolate pipe and she decided that it would be better if she didn't follow the recipe but rather relied on instinct and experience in getting the texture right.
When it came to judging her work, the chocolate pipe did not deliver as it was meant to as she did not follow the recipe. She did this twice on two separate occasions in her cooking preparation and in my opinion, this cost the competition and the $100 000 prize.
This is no different to trading - We all should have trading plans, which are written out and which clearly list all steps required for us to take in order to succeed in this business. Once we deviate from the plan (instructions) we rely on gut instinct and chance and this leads to losses and frustrations.
Recipes to a chef are like trading plans to a trader!
Interesting. I agree that you need to make your decisions prior to entering the trade so there are no on-the-fly decisions because if there are then they will almost certainly lead to unprofitable behavior.
we might consider following decisions, what we need to do if market
1. going in our favor (targets, scale in, move stops, trailing stop)
2. consolidating (close position, scale in, move stops)
3. going against us.
but even if we are consistent with our plan, do we have knowledge that our specific consistency leads to profitability? do we need to modify plan day by day, depending on the market situation, seasonality?